The Global Carbon Credit Market is Primed for Growth by Increasing Carbon Emissions

 

 Global Carbon Credit Market 

Carbon credits, also known as carbon offsets, represent the reduction of carbon dioxide or other greenhouse gas emissions. They allow emitters to compensate for emissions they produce by purchasing carbon credits from other organizations who have over-complied with their emission reduction targets or carried out emissions reduction projects. Carbon credits have emerged as an effective policy tool that incentivizes emission reductions while allowing flexibility to high emission industries.

Carbon credits are generated through projects that reduce greenhouse gas emissions such as renewable energy projects, reforestation programmes, distribution of more fuel-efficient devices. They guarantee emission reductions that are additional, measurable, long-term, and verifiable. Carbon offsets provide a cost-effective means to lower the carbon footprint of individuals and businesses. The global carbon credit market is witnessing steady growth driven by the growing need to decarbonize the global economy and limit global temperature rise to well below 2°C.

The Global Carbon Credit Market size is estimated to be valued at US$ 36.34 Mn in 2024 and is expected to exhibit a CAGR of 3.0% over the forecast period between 2024 to 2031.

Key Takeaways

Key players operating in the Global Carbon Credit Market are ASLAN Pharmaceuticals, Takeda Pharmaceutical Company Limited, CHIESI Farmaceutici S.p.A., CSL, NIOX, Fountain Therapeutics, Eli Lilly and Company, GSK plc., Infinity Pharmaceuticals, Inc., Mabtech, Kineta Inc., Marinomed Biotech AG, Mycenax Biotech Inc., AstraZeneca, and Panacea Biotec.

Growing environmental concerns and stringent environmental regulations across countries are fueling the demand for cost-effective ways to reduce carbon footprint. Carbon credits provide an opportunity for organizations to offset carbon emissions at lower costs through financing projects such as renewable energy, forest preservation etc.

Countries and policymakers are increasingly recognizing the potential of carbon credit markets in achieving long-term decarbonization targets. This is prompting regulatory developments to enable large-scale international carbon trading and expansion of existing voluntary markets.

Market Key Trends

One of the key trends gaining traction in the Global Carbon Credit Market Demand is the emergence of tokenized carbon credits. By integrating blockchain and digital ledger technologies, carbon credits can be tokenized, enhancing their fungibility, traceability and enabling fractional ownership. This paves way for small investors and retail participation while increasing liquidity in the carbon trading markets. Tokenization of carbon credits makes the offsets tradeable as digital assets 24/7, eliminating many limitations of existing markets such as high transaction costs. It is expected to significantly scale up carbon markets by unlocking a vast pool of untapped demand and financing for emission reduction projects globally.

Porter’s Analysis

Threat of new entrants: Low cost of entry in terms of setting up a carbon credit/project but stringent validation and verification process makes entry difficult.

Bargaining power of buyers: Buyers have moderate bargaining power due to availability of substitutes like renewable energy certificates. However specific nature of credits gives some advantage to sellers.

Bargaining power of suppliers: Suppliers have moderate bargaining power due to availability of a large number of buyers in compliance as well as voluntary markets. However long process of validation and lack of standardization limits their power.

Threat of new substitutes: Substitutes like renewable energy certificates are available but do not provide the same benefits in terms of emission reductionvisibility and reputation to buyers.

Competitive rivalry: Intense competition exists among existing players to capture more market share.

Geographical regions: North America holds the largest share currently due to stringent environmental regulations and a mature carbon market. Availability of advanced technology and expertise provides an advantage.

Fastest growing region: Asia Pacific is expected to be the fastest growing region during the forecast period due to rapid industrialization and infrastructure development. Major emitters like China and India providing huge opportunities for carbon credit projects in renewable energy and energy efficiency domains.

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About Author:

Ravina Pandya, Content Writer, has a strong foothold in the market research industry. She specializes in writing well-researched articles from different industries, including food and beverages, information and technology, healthcare, chemical and materials, etc. (https://www.linkedin.com/in/ravina-pandya-1a3984191)